Eutelsat Communications: First Half 2018-19 Results

  • Continued strong delivery on cash generation strategy
  • Operating Verticals revenues of €660 million, down 2.4%
  • High level of profitability: EBITDA margin of 79% at constant
    currency, above full-year objective
  • Discretionary Free Cash Flow of €235 million at constant currency
    and perimeter
  • All elements of the Financial Outlook confirmed for current and
    future years

PARIS–(BUSINESS WIRE)–Regulatory News:

The Board of Directors of Eutelsat Communications (ISIN: FR0010221234 –
Euronext Paris:ETL), chaired by Dominique D’Hinnin, reviewed the
financial results for the half-year ended 31 December 2018.

Key Financial Data  

6M to Dec.




6M to Dec.


Revenues – €m   688.1   658.1   -4.4%
“Operating Verticals” revenues   675.9   660.4   -2.3%
“Operating Verticals” revenues at constant currency and perimeter   669.9   653.8   -2.4%


  546.2   518.4   -5.1%
EBITDA margin – %   79.4   78.8   -0.6 pts
EBITDA margin at constant currency – %   79.4   79.0   -0.4 pts
Group share of net income – €m   158.0   150.4   -4.8%
Financial structure            

Discretionary Free-Cash-Flow at constant currency and perimeter2

  337.1   235.2   -30.2%
Net debt€m   3,630.3   3,304.3   -€326m
Net debt/EBITDA – X   3.3x   3.1x   -0.2 pts
Backlog – €bn   4.7   4.6   -2.9%


1 Operating income before depreciation and amortisation,
impairments and other operating income/(expenses).
2 Net
cash-flow from operating activities – Cash Capex – Interest and Other
fees paid net of interests received.

Commenting on the First Half, Rodolphe Belmer Chief Executive Officer of
Eutelsat Communications, said: “Eutelsat delivered a solid set of
results in the First Half. While the revenues profile reflected the
anticipated back-end loading in the second half, profitability remained
robust and gearing was further reduced. We continued to leverage all
components of cash generation, with the LEAP cost-savings plan on track,
the effective application of design-to-cost to the HOTBIRD replacement,
the successful €800 million bond issue in October and the disposal of
our stake in EUTELSAT 25B. In addition, although it cannot be reliably
measured at this stage, new provisions in the 2019 French Finance Law
will likely have a significant beneficial impact on our corporate tax

On the commercial front, the Konnect Africa Broadband service is
being progressively launched in several countries, and its initial
reception reinforces our confidence in the strong potential of this
activity. Elsewhere, we signed new or renewal contracts in most
verticals including, in video, first deals for the recently launched
CIRRUS platform as well as regular capacity contracts, and in Mobility,
a multi-transponder deal for maritime connectivity. Several leads are in
the pipeline for the remainder of the year.

In consequence we continue to target a broadly stable topline for our
operating verticals for the year as a whole, and we are confident in our
ability to deliver strongly on our profitability, Discretionary Free
Cash Flow and de-leveraging targets.”

Notes: This press release contains figures from the consolidated
half-year accounts prepared under IFRS and subject to a limited review
by the Auditors. They were reviewed by the Audit Committee on 13
February 2019 and approved by the Board of Directors on 14 February
2019. EBITDA, EBITDA margin, Net debt / EBITDA ratio, Cash Capex and
Discretionary Free-Cash-Flow are considered as Alternative Performance
Indicators. Their definition and calculation can be found in appendix 3
of this document.
Figures as of 31 December 2017 have been
restated throughout this announcement to reflect the retrospective
adoption of IFRS 15 on 1 July 2018. The impact of the application of
IFRS 15 is presented in the note 3 to the consolidated financial
statements. The Group adopted IFRS16 and IFRS 9 on 1 July 2018.


Since the beginning of FY 2018-19, Eutelsat has taken further measures
to maximise cash generation, leveraging all components of cash-flow:

  • The successful issue of an €800 million 2.0 percent Eurobond with a
    7-year maturity, enabling the full redemption of the outstanding bonds
    bearing a 5.0 per cent coupon maturing in January 2019. This
    transaction will reduce pre-tax cash interest by some €24 million on
    an annualized basis from FY 2019-20;
  • The disposal of the interest in EUTELSAT 25B for a cash consideration
    of €135 million;
  • Further progress on the implementation of the capex optimization
    strategy with:

    • The replacement of the HOTBIRD constellation negotiated at highly
      compelling terms thanks to the application of design-to-cost;
    • A long-term service agreement with Arianespace covering five
      launches until 2027, providing cost-effective, assured access to
      space with schedule flexibility;
  • The LEAP cost-saving program, comfortably on track to deliver €30m in
    opex savings this year;
  • The French Finance Law for 2019 contains a provision specifying the
    rules relating to the territoriality of corporate tax applicable to
    telecommunications satellite operators. This will likely have a
    significant beneficial impact on Eutelsat’s tax bill, although it
    cannot be reliably measured at this stage.

At the same time Eutelsat has continued to build the foundations for its
return to growth:

  • Extracting greater value from its core Video business with the launch
    in September 2018 of Eutelsat CIRRUS, a hybrid satellite-OTT turnkey
    delivery solution enabling broadcast customers to offer a flexible,
    seamless content experience across multiple screens, and representing
    a further step in the integration of satellite into the IP ecosystem;
  • Capturing the connectivity opportunity with:

    • The commercial launch of the Konnect Africa broadband service in
      several countries;
    • The completion of the overhaul of the distribution strategy in
      Europe focused on selected specialist distribution partners and
      major telecom operators.


In € millions


6 months to Dec 2017

IFRS 15 restated


6 months to Dec 2017

  6 months to Dec 2018


  Actual change  


Video Applications   443.0   437.0   432.1   -2.5%   -2.0%
Government Services   79.6   79.6   81.8   +2.9%   +1.7%
Fixed Data   73.4   73.4   66.0   -10.2%   -11.9%
Fixed Broadband   42.8   42.8   40.5   -5.5%   -5.8%
Mobile Connectivity   37.1   37.1   40.0   +7.9%   +6.7%
Total Operating Verticals   675.9   669.9   660.4   -2.3%   -2.4%

Other Revenues6

  12.2   12.2   (2.3)   n/a   n/a
Total revenues   688.1   682.0   658.1   -4.4%   -4.5%
EUR/USD exchange rate   1.17   1.17   1.16  


3 The share of each application as a percentage of total
revenues is calculated excluding “other revenues”.
4 Pro-forma
revenues reflecting the disposal of EUTELSAT 25B. Please refer to the
appendix for more detail.
5 At constant currency,
perimeter and accounting standards. The variation is calculated as
follows: i) H1 2018-19 USD revenues are converted at H1 2017-18 rates;
ii) H1 2017-18 revenues are restated from the disposal of Eutelsat’s
interest in EUTELSAT 25B and from the impact of IFRS 15 standards; iii)
H1 2018-19 revenues are restated from the net contribution of Noorsat.
Other revenues include mainly compensation paid on the settlement
of business-related litigations, the impact of EUR/USD currency hedging,
the provision of various services or consulting/engineering fees and
termination fees. Hedging effect amounted to (€7.1) million in the first
half of FY 2018-19 and +€1.9m a year earlier.

Total revenues for the First Half of FY 2018-19 stood at €658
million down by 4.4% at constant accounting standards.

Revenues of the five Operating Verticals (ie, excluding ‘Other
Revenues’) were down by 2.4% on a like-for-like basis excluding a
negative perimeter effect of c.0.5 points (net effect of the disposal of
the stake in EUTELSAT 25B and the acquisition of Noorsat) and a positive
currency effect of c.0.5 points.

Second Quarter revenues stood at €323 million, down 5.7% at
constant accounting standards. Revenues of the five Operating Verticals
stood at €326 million, down 3.0% year-on-year and by 2.2%
quarter-on-quarter on a like-for-like basis.

Unless otherwise stated, all variations indicated below are on a
like-for-like basis, ie, at constant currency and perimeter.

Core businesses

Video Applications (66% of revenues)

First Half Video Applications revenues were down 2.0%
like-for-like to €432 million, reflecting lower Professional Video
revenues in a context of continued price pressure as well as the impact
of a lower contribution from Fransat. Excluding these two factors, pure
Broadcast revenues were broadly stable.

Second Quarter revenues stood at €215 million, down by 2.4%
year-on-year but broadly stable on a quarter-on-quarter basis.

At 31 December 2018, the total number of channels broadcast by Eutelsat
satellites stood at 7,067, up 3.8% year-on-year. HD penetration
continued to increase, standing at 1,500 channels versus 1,275 a year
earlier (+17.6%), implying a penetration rate of 21.2% compared to 18.7%
a year earlier.

On the commercial front, contracts were signed with the Ethiopian
Broadcasting Corporation and the Association of Ethiopian Broadcasters
for capacity on EUTELSAT 8 West B, representing multi-transponder
capacity including incremental resources. A new multi-year,
multi-transponder contract has also been signed with Afghanistan
Broadcasting System for capacity on the EUTELSAT 53A satellite.
Elsewhere, Eutelsat will now sell capacity directly to beIN Media,
reflecting the direct approach implemented in the MENA region. Finally,
the first contracts have been signed for the CIRRUS platform.

Thanks to these contracts and other business opportunities in the
pipeline close to materialization, trends in Broadcast are set to
improve in the coming quarters.

Government Services (12% of revenues)

First Half Government Services revenues stood at €82 million, up
1.7% on a like-for-like basis. This reflected on one hand the
incremental business secured last year over Asia-Pacific at the 174°East
orbital position, and on the other the lower than expected level of
renewals with the US Government in the Fall 2018 campaign.

Second Quarter revenues stood at €39 million, stable on a
year-on-year basis, and down by 8.0% quarter-on-quarter.

Fixed Data (10% of revenues)

First Half Fixed Data revenues stood at €66 million, down 11.9%
like-for-like. The performance of this vertical continues to reflect
ongoing pricing pressure and a highly competitive environment, with
Latin America the main contributor to the decline.

Second Quarter revenues amounted to €33 million, down 11.7% on a
year-on-year basis, and by 3.1% quarter-on-quarter.

On the commercial front, a framework agreement was signed with Orange
incorporating a material multi-transponder renewal which secures
business on a multi-year basis, as well as setting the stage for
potential incremental business in Fixed Data, Government Services and
Mobile Connectivity.


Fixed Broadband (6% of revenues)

First Half Fixed Broadband revenues stood at €40 million, down
5.8% like-for-like. This performance continued to reflect lower revenues
for European Broadband in a context of scarcity of available capacity in
certain Western Europe countries and transition to a new, self-managed
distribution strategy, as well as the expiry of a contract with a
Middle-East customer for a spotbeam on EUTELSAT 3B, re-contracted to
Taqnia in the Mobile Connectivity vertical.

Second Quarter revenues stood at €20 million, down 4.2%
year-on-year and by 1.5% quarter-on-quarter.

Revenue trends stand to improve in the Second Half, notably thanks to
the launch and progressive ramp-up of the Konnect Africa broadband
service in several countries. The commercial service was launched in
November 2018 in DRC (Democratic Republic of Congo) with a large network
of local partners ranging from telecom and television services
distributors to financial services operators.

In Europe, an overhaul of the standalone distribution strategy, focused
on selected specialist distribution partners and telecom operators has
been completed. In this context, an agreement has been signed with the
Spanish telco operator, Masmovil, for the distribution of broadband
services via the KA-SAT satellite, while a Preferred Partner Programme
(PPP) has been launched to reinforce relations with key partners and
revitalize the distribution of KA-SAT capacity.

Mobile Connectivity (6% of revenues)

First Half Mobile Connectivity revenues stood at €40 million, up
6.7% like-for-like. They reflected the positive impact of the new
contract with Taqnia at 3°East and 70°East, the carry-over effect of the
entry into service of EUTELSAT 172B at end-November 2017 and the ongoing
ramp-up of capacity contracts on KA-SAT.

Second Quarter revenues stood at €19.4 million, up 2.6% on a
year-on-year basis, and down by 6.9% quarter-on-quarter.

On the commercial front, a multi-transponder contract was signed with a
leading service provider on multiple satellites for capacity dedicated
to maritime connectivity. This new contract as well as the start of the
UnicomAirNet contract for in-flight connectivity on EUTELSAT 172B will
support revenue growth in the Second Half.

Other Revenues

In the First Half, Other revenues amounted to (€2.3)
million versus €12.2 million a year earlier. They included a negative
(€7.1) million impact from hedging operations. The lumpiness of this
line means the half yearly performance cannot be extrapolated for the
full year.


The number of operational transponders at 31 December 2018 stood at
1,419, up by three units year-on-year and down by eight versus end-June,
principally reflecting the disposal of EUTELSAT 25B.

The number of utilized transponders stood at 970, up 21 units
year-on-year and stable versus end-June. The evolution versus end-June
principally reflects the disposal of EUTELSAT 25B as well as the outcome
of the Fall renewals in Government Services, offset by new contracts
with Orange Slovensko and Ethiopian broadcasters as well as the ramp-up
at 174° East.

As a result, the fill rate stood at 68.3% compared to 67.0% a year
earlier and 68.1% at end-June.

    31 Dec 2017   30 Jun 2018   31 Dec 2018

Operational transponders7

  1,416   1,427   1,419

Utilized transponders8

949 971 970
Fill rate   67.0%   68.1%   68.3%

Note: Based on 36 MHz-equivalent transponders excluding high throughput


7 Number of transponders on satellites in stable orbit,
back-up capacity excluded.
8 Number of transponders
utilised on satellites in stable orbit.


The order backlog9 stood at €4.6 billion at 31 December 2018
versus 4.7 billion a year earlier and 4.6 billion at end June 2018. The
stability versus end-June reflects notably the inclusion of future
revenues related to commitments from Orange and Thales on KONNECT VHTS
as well as the new contracts in maritime and with the Ethiopian
broadcasters in Video which offset the negative effects of the disposal
of EUTELSAT 25B, the adoption of IFRS 15 and natural backlog consumption.

The backlog was equivalent to 3.3 times 2017-18 revenues. Video
Applications represented 77% of the backlog.

    31 Dec 2017   30 Jun 2018   31 Dec 2018
Value of contracts (in billions of euros)   4.7   4.6   4.6
In years of annual revenues based on previous fiscal year 3.2 3.2 3.3
Share of Video Applications   85%   83%   77%


EBITDA stood at €518 million at 31 December 2018 compared with
€546 million a year earlier, down by 5%. The EBITDA margin stood
at 78.8% (79.0% at constant currency) versus 79.4% a year earlier,
reflecting lower high-margin ‘Other Revenues’, the dilutive effect of
changes in perimeter as well as costs related to the Konnect Africa
project. The LEAP program is progressing in line with expectations and
is well on track to deliver on its €30m target for the full year.

Group share of net income stood at €150 million versus €158
million a year earlier, down 5% and representing a margin of 23%. This

  • Broadly unchanged depreciation and amortisation ((€258) million
    at 31 December 2018 compared with (€254) million a year earlier);
  • ‘Other operating income’ of €36 million reflecting principally
    the capital gain on the disposal of the interest in EUTELSAT 25B in
    August 2018;
  • A net financial result of (€53) million (versus (€56) million a
    year earlier), mainly reflecting the balance sheet evolution of
    foreign exchange gains and losses;
  • A tax rate of 35% (versus 27% last year) which does not reflect
    the potential impact of the above-mentioned new provisions included in
    the French Finance Law for 2019. As a reminder, the previous year’s
    tax rate included a positive non-cash one-off related to deferred tax
    liabilities to reflect future changes in the French corporate tax
    rate, as well as the full impact of the refund relating to the 3%
    dividend tax for previous years.


In H1 2018-19 Net cash flow from operating activities amounted to
€379 million, €33 million lower than a year earlier. This reflected
principally the decrease in EBITDA partly as a result of negative
currency and perimeter impacts.

Cash Capex amounted to €130 million, fully consistent with
expectations. As a reminder, last year’s cash capex in the first half
stood at just €53 million, a level which was not representative of the
full year figure.

Interest and other fees paid net of interest received amounted to
€24 million versus €21 million last year.

As a result, Discretionary Free Cash-Flow amounted to €225
million (€235 million at constant currency and perimeter), down 34% on a
reported basis and by 30% at constant currency and perimeter, reflecting
predominantly the phasing of investments. This evolution should not be
extrapolated for the year as a whole.


At 31 December 2018 net debt stood at €3,304 million, up €63
million versus end-June. It reflected on one hand €225 million in
discretionary free cash-flow generated in the first semester and half of
the consideration for EUTELSAT 25B (€68 million), and on the other, the
dividend payment of €310 million and the impact of IFRS 16 for €44
million. Other items, mainly repayments of export credit financing and
financial leases, changes in the foreign exchange portion of the
cross-currency swap and premia for derivatives settled represented a net
amount of €1 million.

The net debt to EBITDA ratio stood at 3.1 times, an improvement
on end-December 2017 (3.3 times). As a reminder, December usually
represents a peak in the annual net debt profile reflecting the timing
of the dividend payment.

The weighted average maturity of the Group’s debt stood at 2.7 years,
compared to 2.5 years at end-December 2017. The average cost of debt
after hedging stood at 2.8% (2.9% in H1 2017-18). When restated from the
repayment of the January 2019 €800m maturity, these metrics stood at 3.4
years and 2.2% respectively.

Liquidity remained strong, with undrawn credit lines of €650 million and
cash of €677 million on top of the €800 million earmarked for the
redemption at maturity of the January 2019 bond.


The Annual General Meeting of Shareholders of 8 November 2018 approved
the payment of a dividend of €1.27 per share in respect of the financial
year ended 30 June 2018, up from €1.21 the previous year. The dividend
was paid on 22 November 2018.


The underlying trend of the five Operating Verticals is broadly in line
with our expectations. The second half will benefit from the ramp-up of
Konnect Africa (fixed broadband), the contracts with China Unicom on
EUTELSAT 172B and in maritime at several orbital positions (mobile
connectivity) as well as an expected improvement in Video on the back of
an easing comparison basis for Fransat and new business signed
(Ethiopian broadcasters, Orange Slovensko, Afghanistan Broadcasting
System) and in the pipeline. The Group therefore confirms its
expectation of ‘broadly stable’ revenues10 for the
current fiscal year with a return to slight growth from FY 2019-20.

All other elements of the financial outlook are also confirmed:

  • The EBITDA margin (at constant currency) is expected above 78%
    from FY 2018-19, taking into account the impact of IFRS 15 and IFRS 16
    accounting standards.
  • The estimated Cash Capex11 spend is expected at an
    average of €400 million12 per annum for the period July
    2017 to June 2020.
  • Discretionary Free Cash Flow is expected to
    grow at a mid-single digit CAGR in the period July 201713
    to June 2020 (at constant currency and excluding the impact of the
    disposal of the interest in EUTELSAT 25B).
  • The Group is committed to maintaining a sound financial structure to
    support its investment grade credit rating with a net debt / EBITDA
    ratio below 3.0x.
  • It also reiterates its commitment to serving a stable to
    progressive dividend.

This outlook is based on the nominal deployment plan outlined hereunder.


9 The backlog represents future revenues from capacity or
service agreements and can include contracts for satellites under
10 Revenues for the Operating Verticals
(excluding Other revenues) at constant currency, perimeter and
accounting standards. Proforma revenues for the five operating verticals
stood at €1,330 million in FY 2017-18, excluding the contribution of
EUTELSAT 25B from August 2017 and restated from the impact of IFRS 15
11 Including capital expenditure and payments
under existing export credit facilities and long-term lease agreements
on third party capacity.
12 Including impact of new IFRS
16 accounting standard.
13 Net cash-flow from operating
activities – Cash Capex – Interest and Other fees paid net of interest


Nominal launch programme

Satellite1   Orbital















Spot beams


36 MHz-



/ Spot beams


Of which


EUTELSAT 7C   7° East   Q2 2019   Video   Turkey, Middle-East, Africa   44 Ku   49 Ku   19 Ku
EUTELSAT 5 WEST B   5° West   Q2 2019   Video   Europe, MENA   35 Ku   35 Ku   None


  H2 2019   Government Services   Flexible   8 “QUANTUM”


  Not applicable   Not applicable


  H2 2019   Connectivity   Africa


  65 spot beams   75 Gbps   75 Gbps


  2021   Connectivity

Government Services

  Europe   ~230 spot beams   500 Gbps   500 Gbps
EUTELSAT HOTBIRD 13F   13° East   2021   Video   Europe


  80 Ku2   73 Ku2   None
EUTELSAT HOTBIRD 13G   13° East   2021   Video   Europe


  80 Ku2   73 Ku2   None
1 Chemical propulsion satellites (EUTELSAT QUANTUM,
EUTELSAT 5 West B) generally enter into service 1 to 2 months after
launch. Electric propulsion satellites (EUTELSAT 7C, KONNECT,
4 and 6 months.
2 Nominal capacity corresponding to the specifications of
the satellites. Total operational capacity at the HOTBIRD orbital
position will remain unchanged with 102 physical transponders (95 36
Mhz equivalent transponders) operated, once regulatory, technical
and operational constraints are taken into account.

Since the last quarterly update in October 2018, the launches of
EUTELSAT 7C and EUTELSAT 5 WEST B are now expected in Q2 2019, versus Q1
2019 previously, with no material impact on the revenue profile.

Changes in the fleet in the First Half

  • Eutelsat sold its interest in the EUTELSAT 25B satellite to the
    co-owner of the satellite, Es’hailSat.
  • The Al Yah 3 satellite started operations.
  • EUTELSAT 33C was relocated to 133°West and renamed EUTELSAT 133 WEST A.


Marie-Sophie Ecuer
Tel: + 33 1 53 98 37 91

Joanna Darlington
Tel: +33 1 53 98 31 07

Cédric Pugni
Tel: +33 1 53 98 31 54

Alexandre Enjalbert
Tel: +33 1 53 98 46 81

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